Government Bailout Programs, Update III

Not a day goes by when we don’t get several calls from homeowners asking about the government bailout programs that have been announced.  Searching on “bailout” on our BLOG will show that this is the third update we’ve written.

We learn a little more every week.  There is still nothing earth shattering to report, but here’s what we do know so far.

  • Your lender must be willing to participate in the program.  Most of the major lenders are still not participating according to this article because they either haven’t figured out how it works and how to get the money, or they simply don’t have the people on staff to handle the requests for workouts.
  • You must have enough income currently to qualify.  The above report says you’ll need to spend no more than 31% of your gross monthly income on your mortgage, insurance and taxes, while I’ve seen other reports that put this up to 40%.
  • Your lender must be willing to discount your loan amount to 90% of the current market value of your house.  For example, if you’ve refinanced when the market was good, say to $130k, but your house is only worth $100k now, your lender has to be willing to accept $90k and write off $40k.  How likely is that?  No one knows yet.
  • If your lender has already foreclosed, and you are in the redemption period in Michigan (typically 6 months), none of these programs are available to you. Although you can still remain in the house, and can try to sell it via a short sale (with our help, at no charge or course), bailout programs will not apply to you.  Why?  Because you don’t own the house any longer – your lender does.
  • Many lenders are offering their own programs, but they generally have tighter requirements than the proposed bailout options we’ve seen.

Our advice at this point? Well, it completely depends on your specific situation.  Call us, we’ll update you on what we know, and do what we can (never a fee) to get you back to better times as quickly as possible.

Finally, we’re naturally skeptical of the government just like you are, even in these times of change with a new administration coming into power in 2009.  We encourage you not to waste any time waiting for the government and hoping they have the end-all cure-all program to help.  As the above article points out, it’s a lot of money, but it’s not going to be enough to help everyone.  You need to look at all of your options.

Joel

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